Kalshi, Polymarket, and other prediction market platforms have jointly sued the Kentucky state over its 14.25% transaction tax.

According to Huoxun Finance, a coalition of prediction market platforms, including Kalshi, Crypto.com, and Polymarket, filed a lawsuit in state court this Friday seeking to block Kentucky's newly implemented 14.25% prediction market transaction tax. This tax, passed by the Kentucky legislature in April, targets platform transaction fees and is higher than the approximately 9.75% tax on the local horse racing industry. The plaintiffs claim the tax is discriminatory, unconstitutional, and may conflict with federal law. Prediction markets fall under the event derivatives market category, and the plaintiffs argue that the tax will increase compliance costs or force transactions to offshore, poorly regulated platforms. The Kentucky Attorney General stated he will firmly defend the law, while Kalshi claims that the high tax burden will weaken the competitiveness of legitimate markets and drive users to unregulated, illegal platforms. This case is the latest development in the conflict between the U.S. prediction market industry and state regulatory tax systems.